George Osborne and David Laws announcing spending cuts on 24 May 2010. Photograph: BBC News
11.29am: My colleague Graeme Wearden has been monitoring reaction to the Osborne announcement in the City. He's sent me this:
The City has identified Capita Group as one of the biggest casualties of today's cutbacks. Shares in the outsourcing and services company have dropped 2% this morning, making it one of the biggest fallers on the FTSE 100.
The government is a major client for Capita - it helps to run the Criminal Records Bureau, and has picked up several contracts from local authorities already this year. Capita also works with The Children's Mutual, which will be hit by the abolition of the Child Trust Fund scheme.
The wider reaction from the financial markets is muted, with sterling steady at $1.44 against the dollar. City economists are digesting the speeches now, and should be commenting soon.
11.13am: It's over. Here is a summary of the key points.
• Osborne announced cuts worth £6.2bn this year. Some £500m will be re-invested, so the net savings are worth £5.7bn. The cuts are set out in a seven-page press notice and at this stage there does not seem to be a great deal of information available about exactly where they will fall.
• The child trust fund will be abolished. From August 2010 payments will be reduced, and from January next year (following legislation) the payments will be abandoned altogether. This will save £320m in 2010-11. David Laws said that some of the money saved would be used to pay for respite care for the families of severely-disabled children, but this will cost just £20m.
• Spending on schools, Sure Start and education for 16 to 19-year-olds will be protected. That means any money saved in these budgets will be reinvested in these areas. The same applies to savings in health, international development and defence, but that had already been announced.
• Councils will have their budgets cut by £1.165bn this year. But the government will scrap the rules ringfencing local authority spending worth £1.7bn, which means councils will have more freedom as to how they spend this cash.
• Osborne has also announced extra spending worth £500m. This comes from the £6.2bn saved. The extra spending includes: £170m for social housing, £150m for 50,000 new apprenticeships, £50m for further education colleges and £50m to cut backdated business rates bills.
• Ministers will lose their right to have a dedicated car and driver. Instead they will have to use a car from the ministerial pool. The saving from this is tiny - only £5m - but it is supposed to show that ministers are also making sacrifices.
• Employment programmes are being cut. The Treasury says the government will save £320m by ending "ineffective elements of employment programmes". This includes ending the further rollout of temporary jobs through the Young Person's Guarantee.
• Cutting payments on consultantants and travel costs will save £1.15bn. A new efficiency and reform group is being set up, chaired jointly by David Laws and Francis Maude, to ensure these savings really do take place. Laws said that this would impose a "draconian" regime and that it would sent a "shockwave" through Whitehall.
I'm heading back to the Commons now. But I'll be topping up this blog through the morning as reaction to the announcement comes in.
10.48am: Q: Will Britain have to pay to bail out the eurozone? And how will the government ensure the cuts are enforced?
Osborne says the eurozone countries are very important trading partners for the UK. But the eurozone countries have to sort out their own problems.
On the cuts, Laws says he is being "very draconian". He is setting up an efficiency and reform group to ensure that departments really do deliver the savings they are supposed to be delivering. He says this will send a "shockwave" through Westminster.
Q: Why are the business department cuts so large? And how did Vince Cable react to them?
Osborne says the business department is one of the biggest spending departments in Whitehall.
Laws says Cable was "very pleased indeed" in being able to play his part. Cable is "the deficit hawk's pin-up", Laws says.
The business department's budget is being cut by 3.9%. That is exactly the same as the value of the cuts to the chancellor's department.
10.43am: Q: Was finding these savings easy or difficult? And how easy will it be to find more savings?
Osborne says that if you have the "political will", you can get on with this task.
Laws says he was pleased how quickly he could complete the process. The final decisions were taken at 11.45pm on Friday night. That's quite early for an announcement of this kind, he says.
But there were some "tough decisions", he says. He cites the child trust fund decision as an example. He says telling people that they were gaining an asset was "deceiving them" when it was being funded by unsustainable government borrowing.
Q: Have departments identified individual programmes that will be cut?
Osborne says the Treasury has gone into quite a lot of detail with departments. But it has also given them the freedom to decide what they want to cut. He says that, as well as cutting local government funding, the Treasury has also scrapped the rules ring-fencing spending worth £1.7bn. That means councils will be free to decide how they want to spend this money, instead of being told they have to use it for certain projects.
(In the press release the Treasury calls this "de-ringfencing" - a new piece of Whitehall jargon, I think.)
10.38am: A Treasury official has just handed round the press notice. There is a lot more detail that I haven't managed to post yet. Osborne and Laws are now taking questions.
Q: What will be the impact on jobs?
Osborne says the Treasury wants to create jobs. It wants to produce an environment that will encourage the private sector to create jobs. As far as the public sector, the "vast majority" of the savings will come from posts not being filled, not from workers being sacked.
(The Treasury press release is now on the Treasury website.)
10.32am: David Laws is speaking now. He says that he has identified savings worth £6.243bn. That does not include savings in health, international development and defence.
He gives the department by department figures. I'll post them in full later, but they include £683m from transport, £780m from communities, £836m from business, £450m from local government, £367m from the Home Office, £670m from education, £535m from work and pensions, £325m from justice, £120m from rural affairs, £85m from energy and £55m from the Foreign Office.
There will be a freeze on the employment of new civil servants, except in key areas.
The Treasury will have to approve all civil service salaries that are worth more than the prime minister's salary. Given that David Cameron has now accepted a pay cut, that means any salary worth more than £142,500.
Ministers will lose their individual ministerial cars in most cases. They will be expected to use public transport, or cars from the government car pool.
Civil servants will be banned from using first class travel. Quangos that spend money on first class travel could have this taken from their budgets.
Laws confirms that the child trust fund will be scrapped. But an extra £20m will be available for respite care. This will pay for an extra 8,000 week-long breaks for people caring for severely-disabled children.
There will be "many more tough decisions", Laws says. "The years of public sector plenty are over."
The government will "cut with care". Osborne and Laws want to protect the vital public services "we all depend upon" and protect the vulnerable.
10.19am: Osborne is still speaking. He says he is taking the first step towards building a public sector that works for everyone.
Now he is introducing David Laws. In the meantime, here are the two main points from his opening speech.
• The child trust fund will be scrapped.
• Spending on schools, Sure Start, 16 to 19-year-old education - as well as health, international development and defence - will be protected. That means that any savings found in these budgets will be reinvested in these areas.
10.14am: George Osborne arrives with David Laws, the chief secretary to the Treasury.
He says most the the money saved will be used to cut the deficit this year, "so that we can avoid the jobs tax next year".
He says the government has concluded "the fastest and most collegiate spending review in history".
He thanks Sir Peter Gershon and Martin Read for the advice they gave to the Tories in opposition. (Gershon and Read said the Tories would be able to find cuts worth £6bn this year on top of the savings already planned by Labour.)
He says the government is already spending more on debt interest than on defence, on transport or on the police. If the government does not take action, debt repayments will soon cost more than school spending.
Last week Osborne twice attended meetings of European finance ministers. He was conscious of representing the country with the biggest deficit.
Osborne confirms that the child trust fund will be cut. But the money that would have been spent on disabled children will be used to fund respite care, he says.
Osborne also says that he will protect spending on schools, Sure Start and education for 16 to 19-year-olds. Any money saved from these budgets will be re-invested in these areas. Osborne had already said that the same would apply to health, international development and defence
10.07am: Details of the announcement will be available on the Treasury website. They are not there now, but they should be there shortly.
10.02am: We're in the open-air courtyard inside the Treasury. It's very pleasant: shady, a few big trees around, and two podiums (podia?) that look presidential. But what's strange is that there seem to be more than 100 Treasury staff lined up to watch. Some more officials are also watching from the second-storey windows. I can understand why they might be interested. But it doesn't say a lot for Treasury productivity. Don't they have jobs to do?
9.44am: I'm just off to the Treasury press conference now. Laura Kuenssberg has got there already. She tells Twitter that the Treasury are planning to hold the event outside. But it does not seem to be an austerity measure, and they haven't had to sell the roof yet. The Treasury want to make the most of the sunshine.
Just arrived at the Treasury for cuts press conference - I hear they plan to hold it outside in the sunshine
Laura Kuenssberg
BBCLauraK
9.38am: Jim Naughtie did not ask George Osborne about the child trust fund story (see 9.22am) on the Today programme this morning. But Sunder Katwala at Next Left has been reading the Sun diligently. He says that this proposal (which has not been officially confirmed yet) would be an example of the Lib Dems pushing the Tories "to the right". He claims that thinktanks from the left to the right have defended the value of child trust funds.
(While we're on the subject, do read the Guardian article Zoe Williams wrote about child trust funds during the election campaign if you're interested in this subject. Zoe started out in favour of the Lib Dem policy, but after doing some research come out strongly in favour of the scheme.)
9.22am: All the papers have stories about the spending cuts. I've linked to the Guardian's version already (see 8.06am). Here are some of the others that are worth knowing about.
• The Sun says child trust funds will be abolished. During the election campaign the Tories said they would restrict them to the poorest families but, according to Clodagh Hartley, the coalition government has adopted the Lib Dem proposal to abolish them completely.
• The Financial Times says union leaders are planning to fight the cuts being announced today.
• Roland Watson in the Times says that suggestions that Vince Cable, the business secretary, is unhappy about his department having to bear the brunt of the spending cuts are untrue. "Vince is very clear about the need to act rapidly, particularly with the eurozone debt crisis," said an ally. "He's absolutely signed up and is leading the way. He has always been something of a deficit hawk."
• The Daily Mail says the spending cuts will include the scrapping of grants used to fund new speed cameras.
9.04am: George Osborne celebrated his 39th birthday yesterday. Apparently, he held two parties at Dorneywood, the country mansion traditionally allocated to the chancellor. The Daily Mirror doesn't approve.
8.56am: Robert Peston, the BBC's business editor, has just told the Today programme that he thinks university spending will be cut by 3% and that Vincent Cable's business department will cut spending by £900m, with £200m being re-invested in apprenticeships.
8.50am: PoliticsHome has put up some of the comments that Liam Byrne has been making about the Tory/Lib Dem cuts today. Byrne said that Labour had spent money responsibly and that cutting spending too soon could plunge Britain into a double-dip recession.
There is a right way and a wrong way to get out of recession, there's a risk the new government are taking the wrong way... This could put us in a slow lane out of recession.
8.49am: In a separate interview this morning Osborne denied a report in the Sunday Times yesterday claiming that 300,000 public sector workers would lose their jobs over the next few years. He told BBC Breakfast:
What I am saying is that the great majority of the jobs impact in the public sector will be simply by not filling posts ... I saw that figure [300,000 jobs] in the newspaper and it is not one I have seen anywhere in government. It is not one that I recognise.
But Osborne seemed to be referring just to the impact of the cuts being announced today. If you read the Sunday Times story carefully, you'll see that the 300,000 figure is an esimate for the jobs that could be lost as a result of the cuts expected in the comprehensive spending review taking place later this year.
8.38am: Osborne's interview is over. It did not take us very much further, but we did learn a bit more about the figures. The cuts will be worth £6.2bn in gross terms, or £5.7bn in net terms because £500m will be invested in apprenticeships, further education and social housing. Osborne made it clear that this was a concession to the Liberal Democrats because they wanted to see some of the savings re-invested on the frontline.
Osborne refused to give further details. He said he wanted to unveil his proposals all at the same time. Normally when ministers adopt this stance on the Today programme, they say they can't give the details to Naughtie or Humphrys or whoever because they have to tell parliament first.
But parliament is not sitting today and Osborne is making his announcement at a press conference. On the Today programme earlier Liam Byrne, the shadow chief secretary to the Treasury, suggested that Osborne should have waited and made a statement in the Commons later this week, in a way that would have allowed himself to be questioned by MPs. Ben Bradshaw has just made the same point on Twitter.
ConDem Govt ignores Parliament by announcing 6 billion cuts in the media first
Ben Bradshaw
BenPBradshaw
8.26am: The Osborne interview is still going on. He says he had "the worst economic inheritance" of any government in modern times.
Q: How radical to you want to be? What differences do you want to bring in by the time you leave office?
Osborne says he wants to create a society less dependent on debt. But he is "profoundly optimistic" about Britain's prospects. Countries like China will become consumers of British goods. Osborne wants Britain to be able to exploit these opportunities.
He wants "a shift in power to individuals and communities".
8.23am: George Osborne is on the Today programme now. He says he's done the "hard work" and identified "wasteful spending" that he will cut. It's worth £6.2bn - not £6bn. Most of the money will be used to cut the deficit. But £500m will be invested in apprenticeships, further education and social housing.
Q: Where are the savings coming from? If £700m comes from business, programmes will be cut, won't they?
Osborne says he is not going to give full details here. But the business department is one of the biggest spending departments in Whitehall. Each department is taking a proportional share of the cuts.
Q: Are you really saying the programmes being cut deliver no benefits?
Osborne says he has identified programmes that deliver very low benefits. It's not his money; it's the taxpayers'.
Q: How do you know taking money out of the economy won't cause a double-dip recesssion?
Osborne says he has taken advice from the Treasury and the Bank of England. The scale of the deficit is the biggest problem facing Britain, he says. Cutting spending will restore confidence in the British economy.
It's about showing the country we mean business ... It's also about saying I don't want to sit here for another 11 months knowing all this money is being wasted and not doing anything about it.
He says cutting inheritance tax will not be a priority for this parliament.
8.06am: George Osborne doesn't hang around. The new coalition government has been in office for less than two weeks and already he's drawn up plans to cut public spending by £6bn. Osborne will announce full details at a press conference at the Treasury at 10am.
In the Guardian today, my colleague Allegra Stratton explains what we can expect.
The government is set to announce further savings of more than £150m by restraining recruitment in Whitehall and ushering in an era of thrift at the civil service, as part of £6bn of cuts to be announced today.
The £163m of savings it will announce today follow the £513m already earmarked by ending the funding of many quangos, but leave much detail to be fleshed out as the government inches its way towards the headline figure of £6bn-in-a-year cuts.
Ahead of details on how the lifestyles of civil servants and culture of Whitehall will change to reflect what both parties in the coalition are agreeing is the "age of austerity", Nick Clegg, the deputy prime minister, said yesterday that the cuts would be "painful and controversial". However the squeeze was necessary to "bring sense" to public finances and required the government to "hold its nerve".
Recent figures saw the deficit figure for this year revised down by £6bn, to the new lower figure of £156bn – excluding the cost of the banks bailout – and now the government will set out a further £6bn reduction, though this time in cuts.
I'll be blogging through the morning, starting with George Osborne's interview on the Today programme, which is just about to start.
